Gulf not immune to global slowdown - UAE bank chief

PRICE FALL: UAE Central Bank Governor Sultan Nasser Al-Suweidi (pictured) said there are now more reasons for countries to maintain their dollar pegs. (Getty Images)

The Gulf nations will not escape the negative effects of the global economic downturn, UAE Central Bank Governor Sultan Nasser Al-Suweidi warned on Thursday.

Speaking at public event in Dubai, Al-Suweidi said while the region had experienced "unprecedented growth", the Gulf was not immune to the economic slowdown.

"I think we have got over the worst case scenario...I don't think we will see any getting away from the pain in the near future," he said.

Measures taken by countries in the region meant they had increased their resilience to "adverse shocks", but the region was not immune to the global slowdown and the impact will vary according to country, he said.

However, as long as the price of oil did not drop below $60 to $80 dollars per barrel, the UAE economy would be in good shape to survive the economic uncertainty, and, according to the International Monetary Fund (IMF), would grow by 6.6 percent in 2008, he said.

Al-Suweidi said the strengthening US currency meant there was now "greater reason" to stay with the dollar and there will be no revaluation of the UAE's dirham peg to the US dollar.

Al-Suweidi highlighted the importance of the on-going plans for a GCC monetary union, and a single currency.

The leaders of the GCC leaders would realise the monetary union and the single currency could act as "engines to further growth in the global economy", he said.

"The capital flows between our (GCC) countries is close to perfect, and that’s why there are a lot of remittances from the UAE to the GCC back and forth. We haven’t seen this before, this indicates that the GCC monetary union is going on the right path and has achieved good results for individuals, businesses and GCC investors.”

Al-Suweidi also said proposed new rules to regulate Sovereign Wealth Funds (SWFs) could have a negative impact on the availability of these funds to investors.

A conclusion would be reached that it would be time to change the strategy for SWFs, which would result in a gradual tightening on these funds.

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READERS' COMMENTS

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Repeg - Depeg - Revaluate the AED
Posted by Madan, Dubai, UAE on Thursday 28 August 2008 at 15:25 UAE time


Its not often that you expect speculation on the strength or rather the weakness of the USD in making monetary decisions at the highest level which appears to have paid off quite well - at least so far! With the current strength in USD offering some breathing space one would imagine that decisions are based on market dynamics and the need to combat inflation given utmost priority.

FreeGold
Posted by Ivo Cerckel, Siquijor, Philippines on Thursday 28 August 2008 at 14:26 UAE time

QUOTE
Al-Suweidi said the strengthening US currency meant there was now "greater reason" to stay with the dollar and there will be no revaluation of the UAE's dirham peg to the US dollar.
Al-Suweidi highlighted the importance of the on-going plans for a GCC monetary union, and a single currency.
UNQUOTE

When you think about it, Europe would like nothing better than for the dollar to get stronger as it inflates.
That’s what’s happening now.
If the US can keep the game going just a little longer
while the GCC and the rest of Asia can get on board of FreeGold, the marking of the gold reserves to market like the European Central Bank, not to model like the US Federal Reserve, this is good for everybody, right?

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